What Is A Credit Card?
A Credit Card is a financial facility that enables you to make purchases on credit. It is issued by banks and allows you to borrow money up to a predetermined credit limit. As a Credit Cardholders, you can use your card to make all kinds of offline and online payments, without having funds debited from your bank account.
When you use your Credit Card for payments, your card issuer typically pays merchants on your behalf and sends you a bill later. This bill is generated on a fixed date each month, known as the billing date and it comprises details of all your transactions, and a due date. You must repay your bill in full to avoid paying interest on your credit card expenses.
Credit Cards also offer perks like reward points, cashback, and discounts on purchases. By using the card responsibly, you can manage your finances without accumulating debt.
How Do Credit Cards Work?
A Credit Card is a wonderful convenience that lets you pay for your purchases online or offline without cash. But how does a Credit Card work?
Let’s begin by examining a Credit Card carefully. A Credit Card comes with the following:
- A number that uniquely identifies it
- An expiry date
- The name of the holder
- The logo of Visa or Mastercard – the two companies that provide the infrastructure and systems that process Credit Card transactions.
On the back of the Credit Card is:
- A magnetic strip or chip
- The CVV number. This is needed for online transactions.
How do Credit Cards work? Let’s take a look at what happens when you use your Credit Card at a retail store.
